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There will be conflicts, and therefor more victims than heroes, along the way to a more human China.
The threat of US trade sanctions, such as tariffs, would certainly get China's attention, but the cost would be tremendous to us, as well. We're not playing a one-on-one game when it comes to trade. If we hit them in their customer base like this (and they do, indeed, need our markets) even in gradual steps as you suggest, they are certain to retaliate where they can hurt us. My guess would be they find ways to limit US capital investment in China. They need capital investors to grow there. But there's a whole Europe just frickin' full of capital looking for a promising market to put their money in. And there's a Japan, too.
It's not a bilateral field here. We'd take a hit on consumer prices from a tariff AND we'd take a hit on investment and growth opportunities. We'd have a LOT of pissed off bankers and hedge fund managers to contend with. China on the other hand would only have to find new investors, which it surely would given its growth potential, and find new consumer markets to do business with. There might be a shift in their industrial outputs, but not in their industrial development.
If things continued to get ugly with a slow tariff war (which is essentially what you're suggesting as our leverage), there's also the matter of all the public debt we owe them. Chinese banks are among the biggest holders of US Treasury bonds and pissing off one's creditors is never a great idea. The bonds sell under terms, so it's not like they could just call in our debts one day. But if they really wanted to pressure us into ending our restrictive tariffs, they could start refusing to buy our debt bonds, which along with the inflation that comes with a tariff war would probably start to screw Uncle Sam's credit rating.
We do have leverage points that we can use to get them to be nicer to their people. But we have to use soft power and gradualism to achieve our ends, not hard threats that cut our noses more than spiting our trade partners. The last three men actually elected president all ran on platforms saying they wanted to get tough on Chinese human rights abuses (Reagan, Clinton, and the grown up Bush). All three ended up facing the reality that we need China more than they need us and the only way to deal with the fat gorilla is to keep him happy while his citizens slowly start to demand the flip side of economic success--political empowerment.
Capitalism is an insideous little coin. It looks so lovely on the one face, Deng Xioaping saw. But the longer you grasp at it, the hungrier people get to share its full benefits and regulate its excesses. Capitalism and industrialism lead to increasing trade unionism. The free market demands it. The invisible hand pushes for environmental regulation and democratized prosperity and spreading the benefits to all those factory workers who are keeping your Wal-Mart buyers well stocked.
China may think they'll keep liberal democracy at bay for the next hundred years. I'm sure Gorbochev and his little glasnost experiment thought the same. Long before we reach the quarter century mark the Chinese people will start clamoring to have more say in their economy, and thus more freedom in their press and politics. Hu Jintao is smarter than Gorbachev, or at least is more sophisticated. But nobody can beat the deadly combination of Levi Strauss and Mickey Mouse. If their workers make goodies, they'll want goodies. If the people want goodies, they'll get goodies, and they won't let a few internet filters stand in their way.
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